Loan Guide

Adverse credit loans explained

What are adverse credit loans, what do I need to know before I take one out and how do I get the best deal?

Adverse credit secured loans are designed for homeowners that are struggling to be accepted for a standard loan.

If you have an adverse credit rating due to county court judgements or mortgage arrears, an adverse credit secured loan is likely to be your only borrowing option left.

In this guide we look at the implications of taking out an adverse credit secured loan, as well as offering top tips on getting the best deal.

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• Face facts
• Will I qualify?
• Interest rates
• Our recommendation

Face facts

You should treat adverse credit loans as a last resort, there are no luxuries such as low interest rates or extended repayment terms to be had here.

The harsh truth behind adverse credit loans that are secured on your property is default and you’re homeless - it's that black and white.

If you’re already experiencing financial difficulties, don’t take out an adverse credit loan. It'll only push you further down a financial cul-de-sac.

Contact the Citizens Advice Bureau (www.citizensadvice.org.uk) instead and seek help with your money problems.

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Thanks for the warning. I’ve defaulted in the past and I’m struggling to be accepted for anything. Will I qualify for an adverse credit loan?

Quite possibly.

Adverse credit loans do not discriminate against applicants with poor credit histories who are trying to turn their credit file around. Provided that you faultlessly keep up with repayments, an adverse credit loan can help to repair a damaged credit rating.

Check the interest rate and terms of any loan thoroughly before signing anything though, your home is very much at risk when you enter into an adverse credit loan agreement.

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But the interest rates are huge, right?

Correct.

Adverse credit loans can be higher than average (around the 15% mark), which is due to the considerable risk to the lender that most applicants pose. The lack of options open to the adverse credit loan applicant means that you’ll just have to accept this.

With the high interest rates in mind, don’t over stretch your budget on a steep repayment schedule for your loan, and don’t be tempted to take a bigger loan than you need.

Should you consistently default on loan repayments then the lender has the right to repossess your property as payment in full of the loan amount. When you’re weighing up the possibility of applying for an adverse credit loan, this factor should be foremost in your thoughts. The consequences are considerably grave for you and your family should anything go wrong.

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My budget adds up, I can afford this loan. Where do I go from here?

To get an adverse credit loan, follow our top tips:

• Check your credit report before you apply for a loan – Not only will checking your credit report reveal how you look to prospective lenders, it also gives you the opportunity to correct any information that is wrong and give yourself the best chance of being approved.
• Improve your credit rating – If you are struggling to find a lender that will lend to you, try everything you can to improve your credit rating. A good start would be to follow our top 10 tips to fix your credit rating.
• Don’t borrow more than you need – You may increase the chances of getting approved by reducing your loan amount, and while it may be tempting to add a little extra to the loan amount to treat yourself, don’t do it. Borrowing more will cost you even more in interest in the long run, and you’ll likely be in debt for longer, so only borrow what’s necessary.
• Apply selectively – Don’t apply for lots of adverse credit loans at once as this could seriously damage your credit rating even further. Select the loans you apply for carefully, and spread out your applications over some time. Try and find out a company’s lending criteria before you apply, to see whether you match it.
• Shop around for PPI – If you decide that you want to take out payment protection insurance, don’t buy this from your loan provider. Instead, shop around for a better offer.
• Make a budget – Make a note of you income and outgoings and work out carefully how much you can afford to borrow without stretching you finances. It’s crucial that you can afford you monthly repayments, especially when missing them may put your home at risk.

We have partnered with BeatThatQuote whose loan experts will search the loan market, and help you find the best rate for your circumstances. Get a loan quote now.

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